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Author Topic: Dot-com bubble and cryptocurrency bubble  (Read 750 times)
Arvydas77
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February 06, 2017, 02:42:39 PM
 #1

There are many parallels between the famous .com bubble and cryptocurrency space. Some authors and experts point to this example trying to explain what will happen with cryptocurrencies in the future. If you take into account cryptocurrencies seriously, you'll see that bunch of altcoins are useless projects but on the other hand some are showing signs of future growth and real utility cases.

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What is .com bubble?

The dot-com bubble (also known as the dot-com boom, the tech bubble, the Internet bubble, the dot-com collapse, and the information technology bubble) was a historic speculative bubble covering roughly 1995–2001 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the Internet sector and related fields. While the latter part was a boom and bust cycle, the Internet boom is sometimes meant to refer to the steady commercial growth of the Internet with the advent of the World Wide Web, as exemplified by the first release of the Mosaic web browser in 1993, and continuing through the 1990s.

The period was marked by the founding (and, in many cases, spectacular failure) of several new Internet-based companies commonly referred to as dot-coms. Companies could cause their stock prices to increase by simply adding an "e-" prefix to their name or a ".com" suffix, which one author called "prefix investing."  A combination of rapidly increasing stock prices, market confidence that the companies would turn future profits, individual speculation in stocks, and widely available venture capital created an environment in which many investors were willing to overlook traditional metrics, such as P/E ratio, in favor of basing confidence on technological advancements. By the end of the 1990s, the NASDAQ hit a price-to-earnings (P/E) ratio of 200, a truly astonishing plateau that dwarfed Japan's peak P/E ratio of 80 a decade earlier.

The collapse of the bubble took place during 1999–2001. Some companies, such as pets.com and Webvan, failed completely. Others – such as Cisco, whose stock declined by 86% – lost a large portion of their market capitalization but remained stable and profitable. Some, such as eBay.com, later recovered and even surpassed their dot-com-bubble peaks. The stock of Amazon.com came to exceed $700 per share, for example, after having gone from $107 to $7 in the crash.
I don't not completely agree that we'll see the similar pattern in crypto space. Actually, I'm optimistic towards the survival of some altcoin projects. However, it is clear that in the future most of the projects will disappear. The prospects and future of blockchain is also obscure. There are many problems around Bitcoin as well: governance issues, centralization, power consuming and nature unfriendly mining, miners and developers debate, marketing, adoption, fees etc. If these problems remain unresolved, I'm sure that we'll see another coin to take crown from BTC. But it is just my opinion.

What do you think about .com bubble parallels with cryptocurrencies?

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Vaelin
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February 06, 2017, 03:28:25 PM
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I think there are some interesting parallels. I do not know if the top currencies will lose value in the same way that the top dot-com companies did, however I would anticipate that only 5% of current altcoins can actually contribute anything to the world.

I think the moral of the story is to spread your risk and to try to look past the hype to the fundamentals of the coin. How does it work? What is the niche? What is their roadmap? What is the development team like? What is the community like? What is the history? Does it solve a problem that needs to be solved?

Many will rue their headlong investment into the dot-com space, but those savvy investors who made the right decisions struck gold.
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February 06, 2017, 05:14:45 PM
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How are cryptocurrencies a bubble? I do not know anyone who has any.
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